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Saving up for car vs Investing and take out car loan
Old 12-08-2019, 10:22 PM   #1
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Saving up for car vs Investing and take out car loan

I'll be moving back to LA sometime next year and started saving up for a car. I can save ~$2.5k/mo while maximizing my tax-advantaged accounts, however the problem is timing. I'm basically waiting on my GF to get a job.

Should I lessen my contributions so that I can save more a month, in case I move soon? If so, how much? Or shall I continue investing (perhaps brokerage or front-load) and take out a loan for the car?
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Old 12-08-2019, 10:59 PM   #2
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IMHO. I always pay cash. Cars = poor/no investment. Why pay interest. But, I understand, the reasons, people like "new". Good luck.
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Old 12-08-2019, 11:57 PM   #3
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There maybe be 0% financing available to you from the dealer for a year or two.
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Old 12-09-2019, 12:35 AM   #4
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If you are going to move to LA, will you need to get a new job there ?
Do you already have the cash saved for doing the move ?
Being able to save $2.5K per month while maxing tax savings is great.
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Old 12-09-2019, 05:42 AM   #5
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Just for what ever works for you, My first new car I get a loan from my credit union and then after it was paid off I kept the same payment going to CU to setup a fund for next car. Never had car payments since then (I did open a loan 2 times, once 0% and last car I got extra $500 off price if I got a loan for car. Paid it off at first payment due date.)

I would also suggest you check on a reliable used car as many have been leased the past several years and once they come off lease they are sold as used cars. I try to find something like 4 or 5 years old.

YMMV
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Old 12-09-2019, 06:25 AM   #6
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I've had a car fund for probably 25 years or so. When the current cost of my car payments are less than $450, I pay the difference to the fund. When the current cost of car payments are more than $450, it pays me the difference. Therefore, my car cost is a constant $450, non COLA. This is allows me to budget that constant amount for all my retirement planning, through about age 80, when I pay off my last car purchase from it (and I assume no longer buy a new car).

Over the years I have either payed cash for cars, from the fund, or got a loan. It usually works out best to get a loan, due to it being a lower interest rate than what I make each year on the car loan. Same reason why I did not pay off my mortgage.
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Old 12-09-2019, 06:41 AM   #7
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Quote:
Originally Posted by sizzlinkola View Post
I'll be moving back to LA sometime next year and started saving up for a car. I can save ~$2.5k/mo while maximizing my tax-advantaged accounts, however the problem is timing. I'm basically waiting on my GF to get a job.

Should I lessen my contributions so that I can save more a month, in case I move soon? If so, how much? Or shall I continue investing (perhaps brokerage or front-load) and take out a loan for the car?
I would continue maxing retirement savings. Take a loan for the car if necessary.
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Old 12-09-2019, 07:15 AM   #8
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Way too many variables not provided but if you are looking to buy a car and have a question like that it may be that you are not ready yet and don't have any cushion for emergencies, etc. Why would you not wait until you move to LA? If you need a car now what about a good used car that you can afford? What does your GF have to do with buying a car? Will she be contributing to the payments? Good Luck.



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Old 12-09-2019, 07:25 AM   #9
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Quote:
Originally Posted by sizzlinkola View Post
I'll be moving back to LA sometime next year and started saving up for a car. I can save ~$2.5k/mo while maximizing my tax-advantaged accounts, however the problem is timing. I'm basically waiting on my GF to get a job.

Should I lessen my contributions so that I can save more a month, in case I move soon? If so, how much? Or shall I continue investing (perhaps brokerage or front-load) and take out a loan for the car?
There's a lot to unpack here. I wouldn't buy that new car till after you move, as you might find you don't need one, or parking is a challenge, or whatever. Get in the new location and then decide.

Are you supporting this GF? What are you "waiting on"? I'm not sure how that impacts the timing and how much you wish to save.

Contributions - if you mean 401k savings? No I would keep those at max barring emergencies, not to increase other savings. You sound young, so imagine every dollar in your 401k is $10 by the time you retire (because it's probably more).

Car loans are generally cheap. Especially if you make sure there's no early-repayment penalty. Floating a car note over a few months if you're not quite there yet on savings is probably ideal.
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Old 12-09-2019, 07:55 AM   #10
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I don't have much to say in the car discussion since there are a lot more details I'd need. Generally, I'd suggest you spend only enough to get reliable transportation that will last a long time. I prefer to make cars last a long time since I figure I lose money on every exchange.

But this caught my eye:

Quote:
Originally Posted by sizzlinkola View Post
Or shall I continue investing (perhaps brokerage or front-load) and take out a loan for the car?
By front-load, do you mean paying an upfront fee on the investment? Don't do that. There's no reason to start off with a loss on your investment. Go to Fidelity, Vanguard, or Schwab and invest in a low/no-fee index fund.
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Old 12-09-2019, 11:14 AM   #11
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Originally Posted by wolf View Post
IMHO. I always pay cash. Cars = poor/no investment. Why pay interest. But, I understand, the reasons, people like "new". Good luck.
I'm not planning to get a new car. Going for a cheap, used, reliable car for under $10k.

Quote:
Originally Posted by Sunset View Post
If you are going to move to LA, will you need to get a new job there ?
Do you already have the cash saved for doing the move ?
Being able to save $2.5K per month while maxing tax savings is great.
Nope. I work from home. I'll be moving back in with my mom, so I don't need to save any cash for the move.

Quote:
Originally Posted by Badger View Post
Way too many variables not provided but if you are looking to buy a car and have a question like that it may be that you are not ready yet and don't have any cushion for emergencies, etc. Why would you not wait until you move to LA? If you need a car now what about a good used car that you can afford? What does your GF have to do with buying a car? Will she be contributing to the payments? Good Luck.



Cheers!
Quote:
Originally Posted by Aerides View Post
There's a lot to unpack here. I wouldn't buy that new car till after you move, as you might find you don't need one, or parking is a challenge, or whatever. Get in the new location and then decide.

Are you supporting this GF? What are you "waiting on"? I'm not sure how that impacts the timing and how much you wish to save.

Contributions - if you mean 401k savings? No I would keep those at max barring emergencies, not to increase other savings. You sound young, so imagine every dollar in your 401k is $10 by the time you retire (because it's probably more).

Car loans are generally cheap. Especially if you make sure there's no early-repayment penalty. Floating a car note over a few months if you're not quite there yet on savings is probably ideal.
I have a 10 month EF and I was born/raised in LA. If you live in DTLA and if your life revolves around DTLA, you'll be fine with public transportation. I live in LA proper, which is much easier/faster with a car. People might say otherwise but I lived in LA with a car, so can't imagine without one if you need to get around. And yes, I will be getting a used car!

When my GF decides to move to LA, that is when I'm going to buy the car. The problem is that I don't know when that will be. It could be in 2 months or 6 months, maybe even longer. Hence why I'm considering if I should lessen contributions so that I can save faster for the car. She's not involved in payments or anything like that.

My contributions are to my 401k, IRA and HSA.

Quote:
Originally Posted by RunningBum View Post
I don't have much to say in the car discussion since there are a lot more details I'd need. Generally, I'd suggest you spend only enough to get reliable transportation that will last a long time. I prefer to make cars last a long time since I figure I lose money on every exchange.

But this caught my eye:

By front-load, do you mean paying an upfront fee on the investment? Don't do that. There's no reason to start off with a loss on your investment. Go to Fidelity, Vanguard, or Schwab and invest in a low/no-fee index fund.
By front-load, I mean front-loading my investments lump sum vs DCA. Right now, I'm DCA-ing so that I can save for my car. If I wasn't, I'd be front-loading right now to have more time in the market.
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Old 12-09-2019, 11:52 AM   #12
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I struggle with this basic question too. Vehicle loan interest is far less than my investments have been earning. So if I take money that could be invested to buy a car to avoid paying interest, am I really coming out ahead? Of course, investment earnings are not guaranteed. Loan interest is...
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Old 12-09-2019, 01:35 PM   #13
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I just traded in a car that had $7,000 in equity and remaining loan amount of $4,000 @ 3.9% for another 18 months on a new Subaru that has 0.9% financing. I kept the $7,000 and paid off the loan on an RV that was at 5.5%. Heck, I'll borrow as much money as they'll give me at .9% and let my money ride the investments I have them in.

The pay off on the RV saved me the difference between the old car payment and the new car payment with that .9% interest. So with no change in my monthly budget, I no longer owe on my RV, have a brand new car and not a dime of my own down payment. Sweet!
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